American International Bank has been a beacon of success in wholesale banking services across the world. The company has numerous branches overseas that operate in harmony with the bank’s headquarters in New York. However, the company has clear challenges that threaten its ability to maintain a pole leadership position in the banking sector.
It lacks an integrated system, personalized manual services and an outstanding data management. As such, the bank ought to establish an integrated telecommunication network that will enhance its efficiency. From different alternatives available, it is important for the bank to adopt WAN and VPN owing to numerous benefits it stands to reap.
American International Bank (AIB) uses a business model that reflects manual completion of tasks. While we consider that AIB is one of the most profitable banks in the US, the company could increase its profit margin by improving its business model to suit its needs. The current model has provided loopholes through which the company stands to lose in terms of cash owing to inefficiencies. The following is an analysis of problems that the company faces owing to poor business model.
Summary of the Problem and Analysis
Apparently, American International Bank seems to have numerous challenges that have hindered its efficiency. The bank lacks an integrated information system. This has in turn resulted to poor monitoring of overseas branches since the general manager (Tamara), has to take over a month to retrieve information regarding the bank’s operations.
As such, information retrieval costs the company huge amounts of resources in terms of time as well as inaccurate data presentation. Considering that many bank’s operations are located overseas and its need for a positive global image, such objectives will remain elusive for the bank with fragmented information system that continue to typify its operations.
The managers continue to visit the headquarters to discuss any emergent issue and present their reports. As Tamara agrees, it is hard to understand the current business standpoint since reports take at least three months to be processed. This is despite their proneness to inaccuracies and inability to predict the bank’s future performance.
Second, the bank also suffers from increased personalized services delivery. Currently, the company faces a momentous challenge to establish a free flowing system in which its branch managers will be able to monitor customers’ accounts without necessarily having to embark on personalized inquiries. Indeed, this type of communication is vulnerable to emotions and may be detrimental if managers fail to live up to its principles.
This might also imply that a simple business miscalculation by a branch manager may reduce clients’ trust substantially. As such, AIB should not allow personalized services to characterize its operations although the aspect has been one of the major strengths of the bank. It is important to notice that personalized services can also be achieved by implementing the right business and technology models.
Third, the bank faces an upheaval task of reconciling transactions. Automated systems where customers may be able to handle all of their bank transactions is lacking in the company. The branch managers keep the manual statements. This raises the fear of data backup in case of an accident. Considering that the current data processing systems is dysfunctional, the company’s business model lacks elaborate data management.
Finally, the emerging problems have reduced the effectiveness of the management team. Tamara highlights that the bank made substantial errors in credit authorization. Lack of coordination amongst banks’ branches has made different managers to authorize different credit limits by almost 140%.
Subsequently, the bank stands to lose immense amount of money due to ineffective management department. In fact, lack of coordination amongst various branches has led to crises in which the branch managers pin point the importance of an efficient system that is free of errors and enhances the bank’s ability to deliver quality services to customers and clients. As such, there is an apparent need for a new system.
Discussion: Solution to the problem
How can AIB improve its efficiency and remain profitable? The organization ought to integrate its information systems to avoid its current hiccups experienced in its operations. The bank can explore various alternatives. Chiefly, the organization may decide to utilize network connectivity that does not only enhance communication amongst its branches but also enhance data management. With such a system, the bank will be able to monitor its managers and its clients.
However, for the management to effectively handle its information system there is the need for the clients to adapt to a new way through which they will be able to access bank’s transactions in an automated way. Although the capital cost of such solution remains considerably high, AIB ought to understand that implementation of a new integrated system will not only ease the flow of data but also enhance improved services for the organization (Trotta 47).
To overhaul the current system is a hard task although it is worth it in the end. It implies that the bank ought to assume a strategy given the fact that change is a gradual and a systematic process in all organizations. Strategic planning will entail the prioritization of areas that the bank feels are most inefficient.
The replacement of the system should be a top down strategy where branch managers ought to be integrated into the system at the beginning (Trotta 12). Although the use of manual methods of transaction may continue for a while, the managers ought to have an efficient and a networked system ahead of all departments due to the sensitivity of their tasks.
Subsequently, after a successful rolling out of the project, there is the need for the managers to enhance an efficient system by facilitating the clients to transact with an automated system. By so doing, the company will be able to have a full network and an integrated system in which data storage, retrieval and management will be much easier than earlier on.
It is important for technological change agents (Tamara and Pamela) to be wary of resistance to change. While many organizations appreciate the role of change in their organizations, they comprehend that it is not an easy task and requires strong change management skills (Trotta 23).
To that end, the change agents will have the responsibility of explaining the rationale to the branches located overseas. Besides, it is important for change agents to explain the benefits that the organization will stand to gain by integrating its system.
For customers, implementing radical changes may present a huge challenge and the clients will need to comprehend the role of technology in the banking system. Trotta says that change initiators should be ready to quell any resistance by customers to embrace change by explaining how they will benefit (41).
AIB could explore various telecommunication networks and arrive at those that suit their business needs. Wide Area Network (WAN) represents a network that will enable the bank to have a broader coverage of business operations (Laudon and Laudon 45).
The telecommunication network enhances organizations to relay data to different stakeholders of the bank including employees, stockholders, customers among many others who are located in varied geographical areas. It transfers data over increased distances and utilizes localized computer networks. In this case, AIB will be able to transmit data from and to different branches overseas and enhance it efficiency. Currently, each branches has at least one computer which could be used to enhance WAN’s efficiency.
Second, the bank may explore the properties of Virtual Private Network (VPN) to enhance its information systems. VPN refers to infrastructural network in which an individual may be able to enhance security of information flow (Groth and Skandler 10). It includes the internet. Trotta explicates that VPN allows users and organizations to have a private domain where there is limited access to specific sites (45). This way, the top management team will be able to enhance privacy of information that may relate to the organization.
Other alternatives that company will explore to enhance branch interconnectedness include core banking, Automated Teller Machines (ATMs), DSL and Frame Relay. Core banking refers to the ability of having a networked system amongst branches in which customers can access banking services and other transactions from different bank branches within the larger banking system. Currently, the apparent lack of an integrated system has made the customers not to access such services across all branches overseas.
ATMs will also enhance the flow of data in all branches ensuring that customers will be able to access their monthly statements in ‘a click of a button’. ATMs also enhance the flow of data in the entire banking system without causing backlogs. Frame Relay refers to WAN technology that utilizes packet switching and may be preferable due its cheapness as well as its ease during configuration (Laudon and Laudon 63). Finally, AIB may use Digital Subscriber Line for its availability and fastness in connection.
Conclusions and Benefits
By installing an integrated system within its branches, AIB stands to gain immensely. At the outset, the bank will improve its management’s efficiency. Unlike before, the bank will have an efficient communication system in which a decision does not receive different interpretations from various branch managers.
This will increase the accuracy of executing projects and initiatives without having to rely on a meeting in New York for managers to compile their reports. Besides, the branch managers will be able to submit up to date reports without having to take three months to come up with a comprehensive report.
Additionally, the bank stands to gain from an improved data processing and management system. Initially, the bank faced a momentous challenge in storing data and having a consequent backup system. In fact, if such risks as fire and demolition affected a branch, huge amounts of information would be lost. With an integrated system, all transactions are updated upon completion and as such, the customers can experience improved services particularly when they demand their statements.
AIB will also save huge amounts of overhead expenses initially incurred. Groth and Skandler assert that organizations reduce labor costs since much of the manual work will now be done by machines (87). This implies that the company will ultimately have to down size. Besides, frequent meetings at the headquarters by branch managers will reduce considerably upon installation of such systems.
Finally, the bank will reduce the seemingly bulky paperwork. Nonetheless, this is after deciding on the right network infrastructure to roll out. In this case, it is recommended that the bank utilize both the WAN and VPN while exploring other options such as Frame Relay, DSL, Core Banking and ATMs (Laudon and Laudon 87).
Groth, David and Skandler, Toby. Network+ Study Guide, Boston, Massachusettes: Sybex Inc, 2009. Print.
Laudon, James and Laudon, Peter. Essentials of Management Information Systems, New York: Prentice Hall, 2009. Print.
Trotta, Gian. Information Systems Management, Irwin, New York: McGraw Hill Publishers, 2010. Print.